Foxtons Group - New CEO targets recurring income streams

Foxtons’ new CEO has identified historical failings that are expected to be addressed by upgrades to data infrastructure, investment in staff and a reinvigoration of the Foxtons brand. If successful, over the medium term Foxtons expects margins to expand 500bp and hopes that operating profit will more than double. Importantly, it aims to increase the proportion of recurring income from c 65% currently, thereby reducing cyclical income and increasing the quality of income. We have raised our FY23 EPS estimates by c 8%, reflecting the latest M&A. Our ‘base’ case valuation rises to 59p and our preferred ‘bull’ case valuation rises from 118p to 124p.